Holiday Pay at Christmas: What NZ Employers Need to Know
As the Christmas season approaches, many Kiwi businesses begin to wind down, and staff look forward to some well-earned time off. For employers, it’s also a time to ensure you’re on top of your obligations around holiday pay.
Here’s a quick guide to help small business owners across Aotearoa stay compliant and stress-free over the break.
Understanding Annual Holidays ("Annual Leave")
Under the Holidays Act 2003, most employees in New Zealand are entitled to a minimum of four weeks’ paid annual holidays after 12 months of continuous employment. This leave accrues based on time worked, not hours.
Public Holidays vs Annual Leave
Christmas Day (25 Dec), Boxing Day (26 Dec), New Year’s Day (1 Jan), and the Day after New Year’s Day (2 Jan) are all recognised public holidays. These public holidays fall on Thursday’s and Friday’s this time around.
- If an employee normally works on one of these days, they’re entitled to a paid public holiday.
- If they’re required to work, they must be paid at time-and-a-half and receive an alternative paid day off (a "day in lieu").
Closedown Periods Over Christmas
Many businesses shut down for a period over Christmas and New Year. If you have a regular annual closedown:
- You can require employees to take annual leave during this time, provided you give at least 14 days' notice.
- Employees who haven't been employed for 12 months yet (and don’t yet have annual leave days owing) may be entitled to take unpaid leave or receive 8% holiday pay on their gross earnings.
Calculating Holiday Pay Accurately
Holiday pay should be calculated using the greater of:
- Ordinary weekly pay, or
- Average weekly earnings over the past 12 months.
Accuracy matters here, especially if employees have fluctuating hours or variable pay. Mistakes can be costly and create tension.
Don’t Forget Payroll Dates & Cash Flow
Plan ahead for payroll processing and payments. With banks closed on public holidays and employees often away, it’s important to schedule pay runs and holiday pay calculations in advance.
Also, factor in the cost of public holiday entitlements and any annual leave payouts when forecasting your cash flow for December and January.
How can BFA help?
If you're unsure how to handle holiday pay correctly, it's worth getting advice. At BFA, we regularly help our clients manage their payroll obligations with confidence. Whether it's working through closedown entitlements, public holiday pay rates, or payroll software settings, we’re here to help.
Get in touch with your Client Advisor, our Bookkeeping team, or contact us here
